At present, the government owns all shares of HLL which makes condoms, copper-T, oral pills and blood bags. According to official sources, the strategic sale of HLL has also been okayed by the core group of secretaries. However, there were different views were expressed regarding the remaining 49 per cent shares.

Some officials favour the retension of 26 per cent stake with the government and public sale of 23 per cent. Others are of the view that time is not ripe for offloading the government stake in the public, for this would not fetch a good amount. A global adviser, who was engaged earlier, supported the latter view that this is not the right time for public sale of 23 per cent shares.

The DoD is expected to move a Cabinet note at the next CCD meet favouring 51 per cent equity sale to the strategic partner and 49 per cent to be retained with the government.

HLL is a profit-making PSU, which incurred losses only in 1995-96. In 1997-98, its net profit was Rs 78 lakh, which went up to Rs 1.36 crore in the next fiscal.

The paid-up capital of the company is Rs 15.54 crore. The problems faced by HLL are the ones usually faced by PSUs: surplus labour, high wage cost, unviable operations, etc.

The disinvestment proposal of the DoD is essentially in line with the recommendations of the erstwhile Disinvestment Commission. The commission had suggested "a VRS to bring down the labour cost to a comparable level vis-a-vis its competitors in the private sector. Once this is achieved, the government can offer 51 per cent of its holding to a strategic partner, who would provide further marketing and technological strength to the company to improve its performance in the domestic and export markets."

While favouring a public offer to small investors, the disinvestment commission had insisted that the government should continue to retain 26 per cent of equity in HLL "to ensure that the company's role in the production of contraceptives in the lower price segment for free distribution and social marketing is continued even after disinvestment."